Knowing what losses or damages are covered under your insurance policy is extremely important and oftentimes ignored until there is a substantial a loss or damage. But, understanding your insurance coverage is very important so that you know exactly what is covered and what supplemental insurance you may want to procure to protect your interests.
Most owners obtain some form of property insurance. Property insurance is designed to cover those direct losses (or “all-risks”) except those losses that are excluded from coverage. This is tricky because you start off with broad coverage that gets dwindled down by various exclusions and policy endorsements that restrict coverage. Understanding these exclusions and endorsements is the key to knowing what is covered and, in many cases, how to present a claim to an insurer. This is not easy because insurance policies are confusing.
To explain the confusing language in insurance policies, in Certain Interested Underwriters at Lloyd’s, London Subscribing to Policy Number, MI2226 v. Chabad Lubavitch of Greater Florida, Inc., 36 Fla. L. Weekly D1218a (4th DCA 2011), a building was damaged when a crane landed on it during a tropical storm. The owner had two property insurance policies. It had a policy covering wind damage (“Wind Policy”) and a separate all-risk policy with Lloyd’s of London that excluded windstorm (“Lloyd’s Policy”). The owner’s damages exceeded the limits of its Wind Policy so it smartly submitted a claim under the Lloyd’s Policy for the additional damages arguing that this policy should provide coverage becuase the crane, not the wind, actually caused the damage.
The Lloyd’s Policy contained the following exclusion for wind:
“We will not pay for loss or damage:
1. Caused directly or indirectly by Windstorm or Hail, regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage…
But if Windstorm or Hail results in a cause of loss other than rain, snow, sand or dust, and that resulting cause of loss is a Covered Cause of Loss, we will pay for the loss or damage caused by such Covered Cause of Loss. For example, if the Windstorm or Hail damages a heating system and fire results, the loss or damage attributable to the fire is covered subject to any other applicable policy provisions.”
This bolded language is known as the Ensuing Loss Exception to the windstorm exclusion. Confusing – Oh Yes. What this language really says is that the policy will not cover wind damage, BUT if the wind results in a loss that sets in motion another loss that would be covered under the policy, there is coverage for the other loss. The language in the policy is so confusing that it contains a hypothetical. The hypothetical is really what gives meaning to the application of this Ensuing Loss Exception. The hypothetical illustrates that if a windstorm damages a heating system, the damage to the heating system would not be covered due to the wind exclusion. But, if the damage to the heating system sets in motion an intervening fire that causes damage, this fire damage would be covered. The reason this damage would be covered is because it was not caused by the wind, but rather the ensuing fire (even though the fire was set in motion by damage caused by the wind).
In this case, the Fourth District remanded this case to the trial court to determine the actual cause of the crane falling on the building since it was a factual issue in dispute. Under the Court’s line of thinking, if the crane fell on the building because of wind, there would not be coverage under the Lloyd’s Policy due to the wind exclusion. However, if the crane fell on the building due to some other intervening loss set in motion by the wind there should be coverage under this Ensuing Loss Exception. In other words, if the crane fell because some flying object picked up by the wind struck the crane causing the crane to fall on the building, there would arguably be coverage for the loss to the building.
This case is an example of the confusing language in policies and having an understanding of the language can enable you to present arguments to maximize insurance coverage.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.